Bank of Scotland Ireland is preparing to introduce a new current account for its business customers, stating that it will pay interest on cash balances and offer a lower rate of interest on overdrafts.
Chief executive Mr Mark Duffy has signalled that the bank will significantly undercut the relatively high rates of interest and charges associated with current accounts and overdrafts to fuel competition in the same way it did with its mortgage products.
"The product is over-priced, with margins of 7 per cent and more, transaction fees are exorbitant and there is a refusal to pay anything but derisory interest on credit balances. Through an uncanny convergence on pricing, businesses cannot shop around for a better deal and new competitors are stifled through subtle barriers to entry," he said.
The bank will introduce its current account in April and has reached an agreement with French-owned BNP Bank, which will act as its clearing agent.
Mr Duffy refused to disclose full details of the product but has indicated that customers would not have to switch to using the internet to avail of a rate of interest on cash held in their current account and that overdraft rates would be below those available elsewhere.
In the UK, its parent, Halifax Bank of Scotland, offers overdraft rates at a margin of between 6 and 7 per cent over the base rate of interest, he said. In the Republic the margin can be as high as 10 per cent, with Bank of Scotland Ireland suggesting its overdraft rate will be much less expensive.
The bank is hoping to capitalise on the competitive pricing it introduced in the mortgage market to win business from the main banks.
Mr Duffy believes that many customers will initially split their current account business and use its new product to exert keener pricing from the likes of Bank of Ireland and AIB.
